This is according to a new report from Juniper Research, which estimates that spending on RegTech solutions, specifically, will escalate from an estimated $18bn (₤ 14bn) this year to $115bn (₤ 100bn) by 2023.
Financial commitment is forecast to go up by an average of 45% per annum over the next five years, far more than the 17% invested in compliance as a whole, reflecting a rapid change far away from traditional compliance options.
The Regulatory Compliance Paradox
The aggregated expense of regulatory compliance around the financial business sector is approaching $80BN globally. Yet compliance specific risks continue being at all-time highs.
Why would this be? Solely due to new regulations recommended immediately after the 2008 financial crisis mandate firms to gather, aggregate and report unprecedented amounts of data, and combine complicated principles into their business operations. And yes, these rules are open to diverging translations and not consistently harmonised globally. But at the source of the enigma is the industry’s severe state of technology fragmentation: often within a single organisation, the same data is presented in many different ways using many different systems.
This can commonly cause highly complex regulatory setups that have escalated in to uninhibited costs, even so without having certainty of compliance: exactly how do you prove obedience to a rule, when the reasoning is hidden deep into a maze of inconsonant systems? This opacity at the same time challenges regulators’ supervisory mandate and might potentially affect market transparency.
Having this rise in complication and antiquated systems showing the existentialist and antique beliefs, it is predicted that RegTech will represent 40% of businesses total compliance spending by the year 2023.
The conclusions arrive as businesses start adhering to General Data Protection Regulation (GDPR), which came into law earlier this year and could possibly hit companies with fines worth up to 4% of their global annual turnover.
“Any heavily regulated business sector not prioritising RegTech adoption would risk damaging fines from failing to keep pace with regulatory changes,” Juniper warned.
After checking multiple technologies for estimated timescale of consequences and costs barriers, Juniper concluded that cloud computing is currently one of the most disruptive force in the RegTech sector.
The most recent report argues that transitioning to cloud-based compliance is a “crucial precursor” to other regulatory modern technology approaches, for instance, artificial intelligence and big data.
“Unless businesses effectively plan the correct cloud deployments, they will struggle to utilise the advanced technologies required to meet future compliance challenges,” Juniper said.
This comes after Claranet UK found that over half of the UK’s financial sector is at this time struggling to understand and act upon the customer data they accumulate.
Legacy systems are considered to be one of the main reasons behind the findings, with cloud technologies indicated as a way of remedying the predicament. Traditional spreadsheet systems have lots of inherent risks and need to be migrated to a more powerful and scalable system, because as we all know, if we don’t grow; our businesses, continue to adapt to new ways of operating, our business will become hardly a footnote in history.